BB&T Corp. Reports Operating Results (10-Q)

Bb&t Corp has a market cap of $20.28 billion; its shares were traded at around $29.45 with a P/E ratio of 11.2 and P/S ratio of 2. The dividend yield of Bb&t Corp stocks is 2.8%.

Highlight of Business Operations:

Consolidated net income available to common shareholders for the third quarter of 2012 of $469 million was up 28.1% compared to $366 million earned during the same period in 2011. On a diluted per common share basis, earnings for the third quarter of 2012 were $0.66, up 26.9% compared to $0.52 for the same period in 2011. BB&T’s results of operations for the third quarter of 2012 produced an annualized return on average assets of 1.10% and an annualized return on average common shareholders’ equity of 9.94% compared to prior year ratios of 0.89% and 8.30%, respectively.

Total revenues were $2.5 billion for the third quarter of 2012, up $339 million compared to the third quarter of 2011. The increase in total revenues included $66 million of higher taxable-equivalent net interest income, which was primarily driven by a 28.7% decrease in funding costs from the same quarter of the prior year. The decline in funding costs included a $26 million benefit from accelerated amortization of deferred hedge gains and issuance costs due to a change in the expected life resulting from the redemption of the Company’s trust preferred securities. The net interest margin was 3.94%, down 15 basis points compared to the third quarter of 2011, which reflects the runoff of covered loans, lower yields on new loans and securities partially offset by the lower funding costs described above. Noninterest income increased $273 million, primarily attributable to a $92 million increase in insurance income and an $88 million increase in mortgage banking income. The increase in insurance income included approximately $74 million as a result of the acquisition of the life and property and casualty insurance operating divisions of Crump Group Inc. (“Crump Insurance”) on April 2, 2012, as well as the benefit of other acquisitions that closed in the fourth quarter of 2011 and firming market conditions for insurance premiums. In addition, other income was up $50 million due to $37 million in net losses and write-downs recorded on commercial loans held for sale in the earlier quarter.

Total shareholders’ equity increased $1.6 billion, or 8.5%, compared to June 30, 2012. The increase was primarily driven by earnings of $496 million and net proceeds of $1.1 billion from the issuance of Tier 1 qualifying non-cumulative perpetual preferred stock. The Tier 1 common ratio was 9.5% and 9.7% at September 30, 2012 and June 30, 2012, respectively. In addition, the Tier 1 risk-based capital and total risk-based capital ratios were 10.9% and 14.0% at September 30, 2012, respectively, compared to 10.2% and 13.5%, respectively, at June 30, 2012. The decline in the Tier 1 common equity ratio was primarily attributable to the intangible assets associated with the acquisition of BankAtlantic on July 31, 2012, while the increases to Tier 1 risk-based and total risk-based capital were due to the issuance of Tier 1 qualifying non-cumulative perpetual preferred stock during the third quarter. BB&T’s risk-based capital ratios remain well above regulatory standards for well-capitalized banks. As of September 30, 2012, measures of tangible capital were not required by the regulators and, therefore, were considered non-GAAP measures. Refer to the section titled “Capital Adequacy and Resources” herein for a discussion of how BB&T calculates and uses these measures in the evaluation of the Company.

Net interest income on a fully taxable-equivalent (“FTE”) basis was $1.5 billion for the third quarter of 2012, an increase of 4.5% compared to the same period in 2011. The higher net interest income was driven by a decrease in funding costs. This decline in funding costs included a $26 million benefit from the accelerated amortization of deferred hedge gains and issuance costs due to a change in the expected life resulting from the announced redemption of the Company’s trust preferred securities. For the quarter ended September 30, 2012, average earning assets increased $12.7 billion, or 9.0%, compared to the same period of 2011, while average interest-bearing liabilities increased $3.5 billion, or 3.0%. The net interest margin was 3.94% for the third quarter of 2012 compared to 4.09% for the same period of 2011. The 15 basis point decline in the net interest margin was due to runoff of covered loans, lower yields on new loans and growth in the securities portfolio, which has been partially offset by lower funding costs.

Financial Services reported net income of $196 million compared to $194 million in the prior year. Net income results were driven by a $68 million increase in segment net interest income and a $19 million increase in noninterest income. The increase in segment net interest income was primarily due to strong loan and deposit growth generated by Corporate Banking and BB&T Wealth. Corporate Banking’s loan and transaction deposit growth over the prior year totaled 53.6% and 124.1%, respectively. These increases were generated through strong growth in both existing core markets as well as newer markets, including Texas and Alabama. BB&T Wealth reported loan and transaction deposit growth over the prior year totaling 34.5% and 39.0%, which was driven by client acquisition and cross-selling initiatives. The increase in noninterest income was primarily driven by higher trust and investment advisory revenue, investment banking and brokerage commissions, and mortgage banking referral income related to BB&T Wealth clients. The growth in segment net interest income and noninterest income was partially offset by a $47 million increase in noninterest expense and a $28 million increase in the allocated provision for loan and lease losses. BB&T Wealth has expanded its loan delivery platform to provide a tailored origination and servicing experience to meet the unique needs of the wealth client, making its lending products more competitive in the market and enabling BB&T Wealth to better serve current clients and compete for new clients. Segment net interest income for Financial Services includes the net interest margin and FTP related to the loans and deposits assigned to BB&T Wealth that are housed in the Community Bank.

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